A proposed law making providers like banks or power companies share consumers’ information more easily is expected to boost competition and flexibility, writes Bell Gully’s Richard Massey
Consumers will be handed more power over their own information, after the Government last week confirmed plans to introduce a consumer data right in New Zealand.
The move follows a consultation period last year, and extensive submissions from a wide range of industries. A second round of detailed policy decisions on the CDR framework is expected later this year, and legislation is expected to be introduced in 2022.
The CDR would create a statutory ability for consumers to require entities holding their data (“data holders”) to share that information with third party providers of products or services (“data recipients”) with the consumer’s consent. Under the CDR:
Data holders within a designated sector (e.g. banks or energy companies) would be required to put in place systems and processes that enable data to be shared in a standardised, machine-readable format, to facilitate transfer of information to data recipients and aggregation of that information.
Data recipients would be subject to an accreditation regime, which could potentially include requiring directors to meet ‘fit and proper’ person standards, detailed security requirements, and mandatory membership of a dispute resolution body.
The overall goal of the CDR is to improve consumers’ ability to compare products and services and change between them, reduce the cost of doing so, and, over time, facilitate competition between service providers leading to innovation and a greater range of products and services.
Much of the detail is still to be settled. However, to summarise what we know of the Government’s preferences, in terms of how the CDR will be developed:
The CDR will apply to data relating to all end users, whether individuals or other entities such as businesses and trusts. This would extend some of the consumer benefits associated with a CDR to small businesses.
The CDR will apply to “product data” (e.g. information about products or services, terms and conditions, pricing and charge information, etc.) as well as “consumer data” (i.e. transaction histories or account information). MBIE expects this will help consumers to compare products and services from multiple suppliers, provide greater transparency, and reduce “search and switch costs.”
The CDR will allow data recipients to create new data or initiate an action based on the data received, if directed by the consumer to do so. This is referred to as “action initiation” or “write access” (as opposed to “read access” which would simply allow consumers to view data across multiple accounts). MBIE considers action initiation will have various benefits, e.g. facilitating applications for new products or services, or enabling new payment methods.
Structurally, the Government will look to align New Zealand’s system with an Australian model introduced in 2019, which is a multi-sector system. That will involve an overall, high-level framework applying across the economy, which will then be supplemented by secondary legislation applying the CDR to specific sectors and markets. Once a specific sector has been designated, detailed rules would then be designed and applied to reflect the particular characteristics of that sector.
The list of designated sectors is yet to be confirmed, but it is widely expected that the banking industry will be the first sector to which the CDR will apply (likely followed by the energy and telecommunications sectors). The early focus on banking follows heightened interest in open banking in New Zealand and overseas, and is expected to allow a range of potential new applications. These include enhanced data analytics by budget services providers, and improved processes for assessing affordability (by using multiple datasets to identify trends in a customer’s spending and identifying suitable products). Currently, gathering this data would need bilateral agreements with each data holder, but that would no longer be required for accredited recipients relying on the CDR.
In Australia, the consumer data right currently only applies to the banking sector, and as yet there are still only 13 accredited data recipients. This, in part, reflects a high threshold for gaining accreditation (which New Zealand is likely to follow, as noted above). In that light, the full effects of the CDR, if implemented as proposed, may take some time to emerge.
Bell Gully is a foundation partner of Newsroom